Emerging Markets currently underperforming develped markets, but are they ripe for a comeback?

After being red hot for virtually all of 2009, Emerging Market stocks have been grossly under-performing the DOW and S&P 500 since the beginning of this year.

At the beginning of this year most Emerging Market stocks were priced beyond perfection. China started to apply the brakes on growth. The U.S. started to show signs of life. And investors flocked to U.S. stocks which were still attractively valued.

There has been a lot of uncertainty in the market recently, mostly arising from the potential collapse of the Euro. Mature Developed markets are getting more and more squeamish. And the DOW's volatility has risen so much recently, it's somewhat acting like a high beta low float stock. Put together all of that and couple it with most U.S. stocks being near their 52 weeks highs and "poof" the market has taken money off the table. The U.S. markets were ripe for a pullback.

All of the above could lead to the eventual flocking of investors back into Emerging Market stocks. Most of which are now down significantly off of their 2009 highs and attractively valued.

Here is a Y-T-D comparison chart of emerging markets compared to the Dow Jones Industrial Average.